Hyperinflation In 12 Months

[Sour Mash]

UK inflation over the past 5 years has been largely caused by currency weakness. It looks as though the £ is now on an upward trajectory against both the $ and the Euro and certainly if this trend continues then UK inflation should come down. Inflation is unlikely to take off again without some major external event happening which is always possible of course but otherwise there do not appear to be any drivers that would cause high inflation.

IMO Current $ weakness vs the £ is influenced in part by the US debt ceiling pantomime creating uncertainty but I would say mainly the perception that the BoE is more hawkish than the Fed, with QE 'on holding pattern' on this side of the Atlantic but with the Fed seemingly reluctant to even make a gesture towards reducing the ongoing eighty five billion dollars of money printing they do over there every month. Let's see what happens when QE in the UK is increased yet again and as the government does everything it can to increase the money supply through private debt with increasingly desperate schemes like HtB.

The € is still looking very unstable even if the immediate crises have abated. If the continentals get their act together with something that promises a measure of stability you could see it appreciate very quickly.

Currency shifts are certainly one thing that can cause in/deflation (though really, how often is a stronger currency reflected in noticeably cheaper consumer prices, it's usually profiteered away?) but when all the major currencies have and continue to print then it's a fact that prices are going to go up for 'real' stuff vs paper promises of whatever flavour.